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Updated almost 8 years ago on . Most recent reply
Analyzing a Turnkey acquisition
Hello All,
I hope everyone is well and doing great in their investments.
This post is in regards to a turnkey product that I've had under contract for a while and am nearing closing.
The house is a 4br/3ba. It is in the suburbs of Chicago, in South Holland. The provider/seller and I agreed to a $155k purchase price. It is fully rehabbed, but I'm unsure of the age of the roof. It is supposed to rent to voucher tenants for $2200. Cash flow should be around $500.
However, the appraisal that was done by their recommended lender says it's worth $143k. The seller doesn't want to sell it to me for that much but has cut off $5k from the asking, totaling $150k purchase price. He doesn't want to give it to me for the $143k because he claims he won't be making much of a profit, which I find hard to believe considering he acquired the house for $40k. Anyway, now I've agreed to still buy the house, considering the potential cash flow and the long-term returns. however, I will need to cover the difference for the down payment, making it a total of $40k down!
Should I continue on or should I leave this deal?
Most Popular Reply
@Kevin Drouillard request a full SOW (Scope of Work) done on the property so you can see exactly what was done with the property. If the scope of work does not upgrade mechanicals (electrical, HVAC,etc.) then run for the hills. If it does continue to dig further. Does this company own their own property management company? If not, I would be very hesitant. Never buy a property where you are relying on appreciation, its a bad investment model. Have you accounted for vacancy, capex, maintenance, HOA, and management in your calculations. Miss something and your cash flow can quickly bottom out. The cash on cash return is good but there are plenty of questions. Also, $40K down is a large chunk and will handicap you for increasing your portfolio. I'm happy to discuss further if you have additional questions or if I need to expand on anything touched on above. Happy to help!